This is part one of an Atlanta Civic Circle series examining whether the city of Atlanta, Atlanta Public Schools, and Fulton County are losing significant tax revenue from the commercial property assessment gap.
Part two in the series will more closely examine Georgia’s property tax appeals law to understand why corporate property owners are able to keep their taxes so low. Are counties doing enough to ensure fair taxes?
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After receiving an extra $300 million in COVID-19 relief funds over the past three years, Atlanta Public Schools will face tough choices now that the federal aid officially expired on Sept. 30.
That budget shortfall could be solved if local governments stopped under-taxing big-ticket commercial properties, says Julian Bene, who first raised the issue while serving on the board of Invest Atlanta, the city’s economic development agency, from 2010 to 2018.
“I was looking at [property] tax revenues and wondering why they weren’t going up very much after [Atlanta] attracted something like 42,000 high-paying jobs to the city between 2012 and 2017,” Bene told Atlanta Civic Circle. “It should have boosted revenues a lot more than it seemed to be doing–for both the schools, the city, and the county.”
How much is “a lot more”?
The city of Atlanta, Atlanta Public Schools, and Fulton County are potentially missing out on a combined $290 million in commercial property tax revenue annually, according to new findings from a team of researchers at Georgia Tech’s School of Public Policy, led by assistant professor Brian An. They examined Fulton and DeKalb county tax digests from 2020 and commercial property sales records in the city of Atlanta from 2019 and 2020, then compared them to the appraised value by the Fulton Board of Assessors.
The Georgia Tech researchers determined that on average, Atlanta commercial properties are being appraised at just 61% of their actual market value, based on recent sale prices—a 39% undervaluation. Under Georgia law, every property must be assessed annually at fair market value. (Fulton property taxes are levied based on 40% of a property’s assessed value.)
In the city of Atlanta, the study found that commercial real estate was assessed at $13.4 billion for the two-year period —roughly a $6.7 billion undervaluation, assuming all of it was assessed at 60% of market value instead of 90%.
The gap between appraised and market value is most significant for trophy commercial properties. Consider the 41-story skyscraper commonly known as Symphony Tower, located at 1180 Peachtree Street. Since 2018, the building’s fair market value, as appraised by Fulton County, has actually decreased by $85,000 to $193 million, according to county tax data. Yet, the building sold for $465 million in 2022.
Meanwhile, many Atlanta homeowners’ taxes keep going up. Even though the Atlanta School Board voted to maintain the same 20.5 millage rate for 2023, that represents a 9.14% tax increase due to increasing property values, according to a report by the Atlanta Journal-Constitution.
Bene’s pet peeve is 725 Ponce, a 12-story office tower on the BeltLine next to Ponce City Market. Cousins Properties bought the 372,000 square-foot building for $300.2 million in July 2021, but it was appraised at only $103 million that year—and the valuation was not increased in 2022.
That $200 million discrepancy is “kind of foolish,” says Bene, especially when the office building has tenants like BlackRock, which manages $9.4 trillion in assets.
Bene believes that the Georgia Tech researchers are underestimating the commercial property tax gap. Due to a combination of underassessment and various tax breaks for trophy properties, Fulton County, the City of Atlanta, and APS could be losing closer to $500 million annually. An, the Georgia Tech researcher, admits that the data reported is “significantly underestimated,” and that the team is working to update the analysis for the most accurate estimates.
What explains the gap?
Fulton County Chief Appraiser Roderick Conley says his office is handcuffed by state regulations.
“The reality is: there are a number of limitations that prevent us from valuing what some people may think to be fair market value, and a lot of those laws are put in place to protect taxpayers,” said Conley. “In some cases, it may be residential homeowners, but in some cases it may be special interest groups, such as industries. There were unintended consequences when those laws were passed, and—for a lack of a better term—a loophole to reap the benefit.”
That “loophole” is subsection 48–5-299(c) of the Georgia Code, which governs assessment appeals. If taxpayers disagree with an assessment, they can file an appeal with their county’s Boards of Equalization. At that point, the property’s value determined at the hearing is frozen for three consecutive years under the 299(c) provision.
Most appeals are from commercial properties, including out-of-state or foreign investors. According to the Georgia Tech study, Fulton County alone has lost at least $652 million from commercial properties’ successful appeals over the past 12 years from 2011 to 2022, or an average of $54 million a year.
“Taken all together, these findings raise significant concerns over the design of the current appeal system for commercial properties in Georgia,” the study says.
Local officials take note
Atlanta and Fulton County officials say they’ve been concerned about the property tax shortfalls for commercial properties for years. “I’ve seen the data, and I agree there’s a real problem,” says Fulton County Commissioner Dana Barrett (District 3).
“It’s something that we know our taxpayers are concerned about–that there’s definitely a gap between the [market] values of commercial properties and the assessed value,” says Fulton spokesperson Jessica Corbitt-Dominguez. “We’ve found that the more valuable a property, the more successful they are in having their value of that property reduced in an appeal,” she adds. “Not surprisingly, as they say on ‘Law and Order,’ [commercial property owners] lawyer up, and hire people to go to court with them to [lower the value].”
Corbitt-Dominguez says the county is examining the new Georgia Tech study and talking with the city of Atlanta and surrounding counties with similar concerns.
Fulton is among the counties that successfully pushed for the Association of County Commissioners of Georgia to add the commercial property tax appeal issue to its 2024 legislative agenda. Among recommendations included in the legislative toolkit is placing restrictions on the three-year appeal freeze.
Meanwhile, Mayor Andre Dickens’ office says it’s “actively researching” the problem. Josh Humphries, the mayor’s housing policy advisor, says the mayor’s office wants to take care to address the core issue. “At the end of the day, our goal is the same as Fulton County—we want properties to be assessed correctly.”
Atlanta School Board candidates running for election on Nov. 7 also say raising commercial property taxes is on their radar. In a candidate questionnaire conducted by Atlanta Civic Circle and Capital B Atlanta, a majority of the 10 incumbents and challengers said that homeowners shouldered too much of the city’s tax burden.
“A great many commercial properties … are undervalued for tax purposes, and they are not paying their fair share,” wrote Tamara Jones, Seat 7 at-large board member. Seat 9 at-large challenger Nkoyo-Ene Effiong Lewis had a similar take: “While we want to attract businesses to Atlanta to spur economic growth, it should not be to the detriment of Atlanta’s residents.”
[This story has been updated with additional comments from Bene and An.]